Betfair was today forced to surrender to the German tax authorities as a newly imposed levy on sports betting made its operations there unprofitable.

The group has been negotiating with the country’s authorities since the 5% tax on sports bets was introduced in July.

Betfair argues that because it operates as an exchange the flat 5% tax on stakes is unfair. Its punters trade in and and out of positions rapidly so what they wager is actually far less than the actual stakes the tax authorities claim.

It said Germany accounted for around 4% of its revenues last year and £6 million of operating profits. But analysts warned that the group could face a further bill for £20-25 million if it is forced to pay the tax on bets placed in Germany between the start of July and now.

Betfair said that it believed “it has fulfilled all of its obligations under German law, including the filing of necessary tax returns”.

The company added: “Discussions are continuing with tax authorities regarding the potential tax liability, if any, arising from bets placed on its exchange since the law came into effect.”

Analysts said that the decision to retreat from Germany came as no great surprise and Betfair shares rose 14.75p to 765.75p.